Report: Wage Theft Rampant In Houston (TX)

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There’s a variety of ways that wage theft happens. Sometimes employers will refuse to pay outright, but others refuse to pay overtime or misclassify their employees as independent contractors.

Eric Stone
POSTED ON MARCH 28, 2019, 11:22 AM

Last August, Harris County prosecutors filed charges against a homeowner who allegedly refused to pay a house painter. The district attorney’s office charged the homeowner with theft of service.

As the county’s first-ever wage theft case, it was big news. But, it was just one case. In fact, hundreds of Houstonians didn’t get paid for their hard work last year, according to community organization Faith and Justice Worker Center. The organization collected 488 claims of wage theft and other labor violations from across the Houston area between February 2018 and February 2019.

“In this initial report, we wanted to publish the total number of wage theft claims that we received over the last year, which amounts to $1.2 million dollars,” said Silvia Chicas, the Information Manager at the Faith and Justice Worker Center.

She said there’s a variety of ways that wage theft happens. Sometimes employers will refuse to pay outright, but some cases are more nuanced. Some refuse to pay overtime or misclassify their employees as independent contractors.

“Employers who are out to break the law have very creative means by which to steal from working people,” Chicas said.

…

Undocumented immigrants are especially at risk for wage theft. Chicas said she’s familiar with this tactic.

“We’ve even had reports of legal permanent residents and citizens just because the employer suspected that they might be undocumented, they issued a threat and said, ‘We’re going to call ICE on you,'” she said.

Bringing the cases to court

Valerie Turner, with the Consumer Fraud section of the Harris County District Attorney’s office, said her office works on going after wage theft violators.

“We’re here to step-in in situations where disenfranchised individuals would otherwise not have any ability to seek assistance,” Turner said in a phone interview.

The DA’s office worked with the Faith and Justice Worker Center on the case against the homeowner who wouldn’t pay his painter in 2018.

“They kind of synthesized the information, passed it on to us, and then we sort of blessed [it] off – ‘Okay, this is a situation where we would definitely consider charges,'” said Turner.

County prosecutors’ new approach to wage theft rests on Texas’ theft of service law – the same law that says you can’t dine and dash or refuse to pay a hotel bill.

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DC Suit of Florida Company is a Primer on Misclassification (DC)

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by Jim Kollaer | January 18, 2019

The recent lawsuit filed by the District of Colombia attorney general against Florida Company Power Design, Inc., labor brokers JVA Services, LLC and DDK Electric Inc., that alleges 535 workers were misclassified as Independent Contractors, or 1099 workers, provides a primer on the way that some construction companies create vehicles to avoid taxes, the payment of overtime, the provision of worker’s compensation, or medical benefits. The lawsuit demands a jury trial where the defendants will have the chance to defend themselves, but the charges detailed give a full picture of how to set up and execute a plan to use independent contractors to act as subcontractors on specific projects for a specific company.

Generally, the process that the attorney general alleges representatives of Power Design used to set up the labor brokers in business and then use those labor brokers to provide manpower for their projects, specifically in the DC area, is being repeated across the country every day. This happens specifically in the construction industry, but it also is being used in various iterations by companies in a broad range of other industries and services as well.

The details of the lawsuit are very specific in how the companies were set up, legalized on a Friday and working on Power Design projects on a Monday. Companies were allegedly set up under names and with owners who had no experience in running a company but who were coached and given contracts and employment documents allegedly by Power Design. They, in turn, provided workers who allegedly worked for Power Design as independent contractors for sub-par wages and with none of the protections provided to Power Design’s jobsite superintendents and foreman on the same jobs.

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Labor Joins Gonzalez Fletcher to Introduce New Bill to Protect Workers from Misclassification

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By Nick Kotsopoulos
Telegram & Gazette Staff
Updated Dec 9, 2018 at 8:05 PM

Imagine working side-by-side with others who have all the benefits of being an employee of a company including paid sick days, a minimum wage, workers’ comp, unemployment insurance and more. Now imagine you are doing similar work without any of those protections because your boss decided to call you an “independent contractor” instead of an employee simply because he wants to cut corners on costs.

It’s called misclassification, and it’s a growing and devastating problem for workers, businesses that do the right thing and our economy as a whole.

The California labor movement joined Assembly member Lorena Gonzalez Fletcher today to tackle this problem head on, codifying into state law a recent California Supreme Court decision that provides a simple test employers must meet to classify workers as independent contractors. The test, a version of which exists in other states, removes uncertainty and ensures workers who are doing the job of an employee have all the protections and rights that should be afforded to them.

Alexei Koseff details the new effort to protect workers in today’s Sacramento Bee:

The bill would strengthen rules that make it harder for employers to classify workers as contractors and limit their rights under state labor laws.

“Individuals are not able to make it on three side hustles. That shouldn’t be the norm. That shouldn’t be accepted,” Gonzalez Fletcher said. She said the court’s decision is essential for maintaining solid employment for workers in a changing economy and for combating the income inequality that has helped drive California’s poverty rate to one of the highest in the nation.

“What we permit, what we don’t permit, what has worked for generations and built the middle class of California, needs to be largely intact,” she said.

(Read More)

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Former Obama labor official details how to stop misclassification

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Smith, speaking at forum in Newark, said interagency, coordinated enforcement and data sharing are two keys

By Alex Wolmart
Newark | Dec 6, 2018 at 1:56 pm

While many brought their worries and hardships, Patricia Smith brought solutions.

Smith – senior counsel at the Manhattan-based nonprofit the National Employment Law Project – broke down the issue of employee misclassification at an event sponsored by the New Jersey Department of Labor and Workforce Development on Wednesday in Newark.

Misclassification is misclassifying workers as independent contractors by filing 1099s rather than W2s. Employers who misclassify avoid having to pay unemployment and disability taxes.

Misclassification, by itself, is not illegal,” she said. “What’s illegal is the consequences of misclassification. When you find misclassification, you’re going to have, depending upon what you’re enforcing, a remedy.”

Smith, a former labor official in President Barack Obama’s administration, has been involved with misclassification for more than 20 years. She said interagency, coordinated enforcement; data sharing; a robust public and press outreach strategy; agency cross-training and joint employment; criminal referrals in appropriate cases; and required reports to either the Legislature or governor on a frequent basis are how the misclassification of employees as independent contractors will be remedied.

Labor Commissioner Robert Asaro-Angelo led the forum. He told the room of a few dozen workers, union reps and lawyers that Gov. Phil Murphy gets it.

“We’re at a time in our state where our governor and this administration wants to stand up for the right to protections, for the women and men who work hard and deserve the opportunities and benefits that they are entitled to,” he said.

And while many public advocates came to give their testimony, it was Smith who had the most to say.

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Remove Power Design From D.C. Apprenticeship Program (DC)

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By: Editorial Board
09/14/2018

The D.C. attorney general’s office recently filed a lawsuit against Power Design, a Florida-based electrical contractor. The lawsuit alleges that Power Design, known for its work on D.C. buildings, is at the nexus of one of the largest wage-theft scandals in the city’s history.

Construction companies are required to employ a certain number of apprentices in order to bid on major contracts within the District. Construction companies need approval by the Apprenticeship Council to hire apprentices and comply with this requirement to bid on contracts in the District. This editorial board calls on the D.C. Apprenticeship Council to renounce apprenticeship eligibility status from Power Design due to the company’s egregious violations of workers’ rights.

The D.C. attorney general’s lawsuit alleges that Power Design misclassified electrical workers as independent contractors instead of employees, allowing Power Design to avoid payroll taxes and keeping the workers from receiving benefits such as sick leave. In addition, the lawsuit claims that some workers weren’t paid the appropriate overtime rate and others weren’t even paid the D.C. minimum wage. Over 500 Power Design workers were mischaracterized as independent contractors, 180 were not paid the required overtime rate, and 63 were not paid minimum wage, which demonstrates a codified company culture of mistreatment and abuse.

This isn’t the first time Power Design has been accused of shortchanging its workers. When the company first applied for the D.C. apprenticeship program last year, Attorney General Karl Racine and D.C. Councilmember Elissa Silverman urged the Apprenticeship Council to deny Power Design’s bid. Racine and Silverman referenced lawsuits filed against Power Design claiming that the company did not pay for overtime work and purposefully misclassified workers.

…

Power Design is just one of many companies that have profited from the massive development and construction wave that the city has undergone in the last few years. By consistently failing to pay their workers their proper wages and benefits, the company has ensured that regular city residents don’t benefit from this development. Rather than allowing Power Design to continue their abuse of the city’s workers, the Apprenticeship Council should follow the lead of their colleagues in the attorney general’s office and demand real changes from Power Design. Doing so would ensure that all of the city’s residents get to benefit from its growth.

While Racine’s thorough investigation into Power Design is vitally important, other branches of the District government must form a united front in combating wage theft in the city. A so-called progressive city government should not be aligning itself with a company that mistreats its workers so egregiously. The government can begin by taking a stand against companies that have abused the rights of D.C. workers.

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Mass. SJC Rules Independent Contractor Statute Doesn’t Apply in Workers’ Comp Case (MA)

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By Elizabeth Blosfield | May 16, 2018

The Massachusetts Supreme Judicial Court (SJC) has ruled the state’s independent contractor statute does not determine whether a claimant is an employee eligible for workers’ compensation benefits in a case that has led to questions about worker misclassification.

“Worker misclassification is a serious problem, both in our Commonwealth and across the nation,” SJC Chief Justice Ralph Gants wrote in a concurring opinion regarding the case.

This issue has come to light after a recent case involving claimant Ives Camargo, in which she sought review of a decision made by the reviewing board of the Department of Industrial Accidents regarding a claim she made for workers’ compensation benefits.

The board had affirmed the findings of an administrative judge by concluding Camargo was an independent contractor not entitled to workers’ compensation. Its decision was based on the definition of an employee in Massachusetts’ workers’ compensation statute.

“The law governing employment relations in this state remains far from uniform.”

After Camargo appealed, the case was transferred to the SJC, which upheld the decision that she is an independent contractor not eligible for workers’ compensation.

In the wake of the case, however, Gants called for the Massachusetts Legislature to consider greater uniformity among laws that classify workers. He added that part of the challenge in preventing misclassification is that there is no uniform definition of an employee. Instead, the law defines employees and independent contractors by several different standards depending on the context.

“In 2004, the Massachusetts Legislature took a significant step toward harmonizing these standards, amending the independent contractor statute…so that its presumption in favor of employee status applied not only to the wage and hour laws….but also to the minimum wage and overtime laws,” Gants wrote. “However, the law governing employment relations in this state remains far from uniform.”

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California Supreme Court Adopts Broad New Misclassification Test

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By Ashton Riley © Fisher Phillips
May 2, 2018

In a groundbreaking decision, the California Supreme Court adopted a new legal standard that will make it much more difficult for businesses to classify workers as independent contractors, drastically changing the legal landscape across the state.

The decision will directly affect the trucking and transportation industry because the workers involved in the case were delivery drivers, but it also has the potential to affect nearly every other industry-including the emerging gig economy.

Specifically, the court adopted a new standard for determining whether a company “employs” or is the “employer” for purposes of the California Wage Orders.

Under the new “ABC” test, a worker is considered an employee under the wage orders unless the hiring entity establishes all three of these prongs:

  • The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact.
  • The worker performs work that is outside the usual course of the hiring entity’s business.
  • The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

This decision not only expands the definition of “employee” under the California Wage Orders, it also imposes an affirmative burden on companies to prove that independent contractors are being properly classified.

As a result of today’s decision, all California businesses with independent contractors will need to conduct a thorough evaluation of such workers to determine whether they are properly classified.

The case is Dynamex Operations West, Inc. v. Superior Court, Cal., No. S222732 (April 30, 2018).

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AG Healey Leads Multistate Effort to Curb Misclassification of Workers

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FOR IMMEDIATE RELEASE: 4/30/2018
Office of Attorney General Maura Healey
The Attorney General’s Fair Labor Division

The following are excerpts from the release:

Attorney General Maura Healey today led a coalition of 12 state attorneys
general in filing a brief to the National Labor Relations Board in support of a decision that
misclassification of employees as independent contractors constitutes an unfair labor practice in violation of the National Labor Relations Act.

…

“Employers that misclassify their employees cheat local and state governments from
collecting millions in taxes each year and create an unfair playing field for others,” said AG Healey. “I urge the National Labor Relations Board to uphold the decision in this case.”

According to the brief, misclassification is an increasingly common way for employers
to avoid their legal obligations to employees and to unfairly compete in the marketplace.
When employers misclassify their workers as independent contractors, it is significantly
harder for those employees to assert their workplace rights, including protections from wage theft, harassment and discrimination. Misclassified workers are also denied Occupational Health and Safety Act protections, and are unable to form unions, collectively bargain for wages and benefits, or join in concerted efforts to improve conditions in their workplace without fear of reprisal from employers.

Employers that misclassify their workers are also able to avoid paying unemployment
insurance and contributing to the worker’s compensation system, which poses significant cost in terms of lost revenue for state, local, and federal government. According to two studies cited in the brief, Massachusetts loses an estimated $259 million to $278 million annually, $87 million of which is in unpaid unemployment insurance taxes, because of misclassification. In 2015, the Massachusetts Council on the Underground Economy reported recoveries of more than $50 million from employers who misclassified their employees from 2013 to 2015.

…

The coalition of state attorneys general submitted today’s brief at the invitation of the National Labor Relations Board. Massachusetts and Pennsylvania led today’s brief, joined by Connecticut, Illinois, Maryland, Minnesota, New Jersey, New Mexico, New York, Oregon, Virginia and Washington.

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Report: Worker-misclassification fight nets $1.4M

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By: Erika Strebel
March 16, 2018 1:25 pm

In 2017 alone, Wisconsin’s work to crack down on employers who misclassify workers as independent contractors instead of direct employees has netted nearly $1.4 million.

Because of seasonal layoffs that can muddy the distinction between permanent employees and someone hired for a specific job, worker misclassification is believed to be rampant in the construction industry.

Industry officials have said deliberate misclassification not only deprives the state of taxes and other resources but also gives dishonest companies an unfair advantage by letting them avoid costs that their more honest rivals roll into bid prices.

In 2017, the DWD continued its crackdown on misclassified workers, identifying 6,230 of them and collecting $1.4 million dollars that went back into the state’s unemployment-benefits system, according to a report released by the state Department of Workforce Development. The department also reported conducting 500 field investigations into worker misclassification.

About this same time last year, state officials had reported recovering nearly $1.13 million over the course of more than three years. The state started ramping up its enforcement of worker-misclassification laws in May 2013.

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Bill would define independent contractors, reform worker’s compensations system (AK)

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21 FEBRUARY 2017 BY MILITARY NEWS

The state is trying to combat employee misclassification by tightening the reins on definitions of independent contractors versus employees.

Independent contractors work on a freelance basis for employers, but the relationship can flirt with the line between contractor and employee. Some companies intentionally call their employees independent contractors to avoid paying payroll taxes and worker’s compensation insurance premiums for them. Some employers also avoid the costs by reporting employees in lower-paying job categories.

House Bill 79, an omnibus worker’s compensation reform bill sponsored by Gov. Bill Walker, would outline an 11-point litmus test for independent contractors, defining when misclassification amounts to fraud. It also makes it the employee’s duty to report work and receipt of other wage-loss replacement benefits, according to Walker’s transmittal letter with the bill.

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During an initial hearing on the bill Monday, Department of Labor and Workforce Development Commissioner Heidi Drygas and Division of Worker’s Compensation Director Marie Marx explained the details of the bills to the House Labor and Commerce Committee. The Worker’s Compensation Board, a citizen board advising the state on worker’s compensation issues, has been tackling the misclassification problem for some time, Marx said.

“We do not want to prevent true independent contractors from operating – we want them to operate,” she said. “We just want to make sure that those employers who are following the law operate on the same level playing field as those that do not.”

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